The phone in Peterson’s forty-third-floor corner office rang early the next morning, July 13, 1983. “Has Mr. Peterson come in yet?” Glucksman asked Melba J. Duncan, Peterson’s Jamaica-born executive assistant. She explained that Peterson was attending a breakfast meeting outside the office. Miss Duncan remembers “lots of urgent” calls from Glucksman that morning. When Peterson arrived about ten, she told him of Glucksman’s calls. Peterson jotted a few “operational” items, as he recalls them, on a yellow legal pad and, wanting to appear solicitous, walked down the two flights to see Glucksman.

Peterson entered what was called “the living room,” a spare office with no desk, a single couch and a couple of chairs. This office, one of three Glucksman used, was located just off the trading floor at the end of an executive corridor. Glucksman preferred this site for operations meetings and formal interviews. Usually, he kept the light-brown Venetian blinds open, so he could peek through the clear glass window onto the trading floor. Today the blinds were closed.

“I just thought it would be one of our weekly meetings,” says Peterson. He barely got into the first item on his agenda when he noticed that Lew “seemed a bit tense, as if he were psyching himself up.” Peterson put down his pad and, like a doctor facing a patient, peered at his co-CEO.

“What do you want out of life, Lew?” asked Peterson.*

“I’ve been giving a lot of thought to my life,” answered Glucksman. “You know how important boats and cruising and ships are to me. Kind of in the same way I have satisfaction when I’m in charge of a boat, I’m beginning to get the same feeling about Lehman. I’d like to do the same thing at Lehman Brothers.” Glucksman spoke of how the full range of his abilities was not used at Lehman and how, if given the chance, he could do at least as well as John C. Whitehead, co-CEO of Goldman, Sachs, or John Gutfreund, who managed Salomon Brothers.

Peterson was astonished. He remembered how happy and honored Glucksman had said he was when Peterson had volunteered to make him co-CEO eight weeks before. Surely Lew Glucksman, a trader, an inside man who displayed little fondness for the client side of the business, who was hardly known to the outside world, surely he didn’t think he could run Lehman Brothers? Hadn’t Glucksman admitted to him in May that he needed Peterson’s firm guiding hand as chairman?

Peterson is a man of many talents, but sensitivity to people is not counted among his virtues. Often he seemed oblivious to the feelings of many of his partners, including those of some he felt close to. He talked about himself—his deals, his issues—rarely about them. While many respected Peterson and credited him with saving the firm, few felt close to him. They had tired of his one-sided conversations, of being summoned to the chairman’s office without notice and expected to appear, sit and wait while Peterson’s battery of secretaries raced through a pile of telephone slips; it bothered partners that Peterson would forget their wives’ names or brusquely telephone their homes when he awoke at five-thirty; that he got his name in the papers, and they rarely did.

Peterson was unaware that Glucksman felt humiliated or that he believed that Peterson was serving out his time at Lehman while robbing Glucksman of the credit to go along with the responsibility he already enjoyed. Peterson believed his outside activities—his work on the Brandt Commission that focused on the problems of the Third World, his successful effort to recruit 250 top corporate executives to join the Bi-Partisan Budget Appeal, which was dedicated to achieving a balanced federal budget—lured business to the firm, much as Felix Rohatyn’s high-profile chairmanship of New York’s Municipal Assistance Corporation attracted business to banking rival Lazard Frères. While many partners were pleased with the luster these activities brought Lehman, Peterson had no idea that his public role rankled Glucksman and his allies.

As Peterson sat listening to Glucksman’s “rambling soliloquy,” he was perplexed. And for good reason. Had Glucksman expressed a desire to run Lehman himself in April or early May, before Peterson promoted him, he could have understood. Instead, Glucksman had showered him with gratitude. He even organized a tenth anniversary luncheon for Peterson on June 6, and allowed the firm to spend $25,000 on a Henry Moore sketch to present to the chairman. Glucksman had even offered an effusive toast, in which he recalled what “a great honor it has been to work with Pete Peterson, and how I look forward to working with him for many years in the future.”*

Peterson asked his co-CEO to explain what he meant by ships and Lehman Brothers.

“This is my whole life,” said Glucksman. “I really don’t have alternatives. It seems to me that with all of your talents and associations, you have options. You’ve talked of other things you can do. Are you at the point in your life where you’re ready to do other stuff?”

Peterson remembers thinking: Sixty days ago we agreed to share power. We announced it to the world. We committed the full partnership, not just him and me, to a course of action. Lew said he was thrilled and grateful. I initiated it. I was sympathetic about bringing Lew in, inviting him to meet with the press. I talked with him about an eventual transition and lining up younger partners under him who could fill key roles—Sheldon Gordon, François de Saint Phalle, Roger Altman. Now this?

“Lew, let me see if I understand what you’re saying,” said Peterson. “Are you saying you want to run the business alone? I don’t understand what you’re saying.”

“Well, there are things I want to do differently,” said Glucksman. “It’s time to heal the wounds at Lehman Brothers.”

“What wounds? Heal wounds with whom, Lew?”

“You’ve had this problem with Bob Rubin.”

“Yes, I’ve had problems with Bob Rubin.”

It was no secret that the chairman considered Rubin a brilliant but negative man, a “passive” banker who rarely left the office, who resisted the infusion of outside capital in 1974, who resisted the merger with Kuhn Loeb in 1977, who resisted Peterson’s efforts to set up a new business and product development office, who resisted his marketing efforts and who even resisted when Peterson solicited his advice about making Glucksman president in 1981. It was Peterson who removed Rubin as head of the banking department in 1977. The chairman was not alone in his view of Rubin. Many partners found him negative and uncommunicative—a sphinx. He was a loner, a tense, taciturn man who, in the words of one partner who respected him, “believed that in the privacy of his own office he would make the right decision and people should just follow him.” Peterson thought he was a nitpicker who seemed to believe in “civilized anarchy” and thus frustrated his desire to run Lehman Brothers like a corporation. Glucksman, however, made it clear that he thought Rubin performed a consistent and valuable function as the house skeptic, the firm’s institutional memory.

“Who else?” asked Peterson.

“Bill Morris,” replied Glucksman.

“Yes,” responded Peterson, who removed Morris as head of the investment banking division in 1982. He reminded Glucksman that Glucksman had agreed with the transfer. To the chairman’s way of thinking, Bill Morris—like his close friend Bob Rubin, but without Rubin’s redeeming brilliance—was a capable banker but a type: a traditional, passive banker who waited for the telephone to ring; Morris did not develop marketing plans to recruit clients, would not go along with efforts to terminate weak partners, mocked Peterson’s countless memos about cutting costs or pushing “new products,” and resisted the chairman’s appointment of Roger Altman as head of the new-business-development group. Morris, Peterson thought, focused too narrowly on a few important clients in the energy business—the Kerr-McGee Corporation and Daniel Industries, on whose boards he served.

Glucksman reminded Peterson that Morris was an important member of the firm, a member of the board of directors. He knew, but did not say, that Morris thought the chairman was neglecting the firm and was, in Morris’s words, a callous man “not terribly interested in the nitty-gritty of administering things; he was very interested in the appearance of things.”

“Who else?” asked Peterson, impatiently.

“Eric Gleacher.”

“Yes,” said Peterson. Eric was a talented mergers and acquisitions partner, but he didn’t think the former Marine lieutenant had the management interest or people skills to run the M. & A. department. That is why Peterson had removed him from this position in 1982. He knew that Eric Gleacher was one of the few people in banking who felt close to Lew and that he was a real asset to the firm; but Peterson was a corporate man, someone who says he believed in team play and a chain of command. Eric, he said, was not a team player, he sneered at the thought of filling out daily telephone call reports.

“Who else?” Peterson asked.

“Henry Breck.”

“Yes,” said Peterson, who remarked that the head of the Lehman Management Company (Lemco), Lehman’s investment management subsidiary, was “not a guy who builds managers and thinks about marketing.” Breck may have attended all the right schools—Buckley, Groton, Harvard, Oxford—but Peterson, like some other partners, was wary of Breck. Perhaps it was the seven mysterious years Breck had spent in the C.I.A. Perhaps it was his ties to Rubin and Morris, his closest friends at the firm. Perhaps it was the disdain Breck communicated to Peterson and others.

“Those are only four people out of seventy-seven partners that there have been some problems with,” said Peterson. “That’s not a great piece of news that I have problems with those four partners.”

“I think I can heal the wounds,” said Glucksman.

“You mean you think I can’t heal them.”

“That’s right.”

“What do you want, Lew?”

“I’m talking about running the business now, Pete.”

“What do you mean now?”

“September 30,” said Glucksman, picking the last day of their fiscal year, a day just over two months off. “I don’t want to wait three years for you to retire because I know now that I’m fresh and eager to do the job. Who knows how I’ll feel in three years.” Glucksman says he then pressed Peterson for a timetable of when he might leave. Although the two men were the same age, Glucksman was confident that Peterson would leave Lehman before he did. “The question was,” he says, “would it be at his convenience or mine?”

Peterson was dumbfounded. He listened, sympathetically he thought, to a man who he now worried might have plotted to corner him in this conversation, perhaps while boating and fishing alone, perhaps in conversations with Bob Rubin, whom Peterson saw as a schemer. He wondered whether Glucksman had quietly polled the twelve-member board and lined up votes. He couldn’t believe that board members like Peter Solomon, Harvey Krueger, Yves-André Istel or Edmund Hajim would have remained silent had they been polled. Peterson had assumed that his financial success at Lehman and his access to corporate boardrooms would assure him support from the board of directors in any showdown. But the remote Peterson had not said more than a perfunctory hello to some board members for months.

Peterson was not an impulsive man. He liked to sift options. He knew that at age sixty, just three years hence, he would be required, like all Lehman partners, to begin cashing in his stock. But, though he had written a memorandum to Rubin and Glucksman on November 26, 1980, which spoke of “my own transition plans” and mentioned his interest in participating in a handful of investments with venture capitalist Eli Jacobs, a friend and business associate over the years, Peterson had no thoughts of leaving immediately. He now thought of a two- or three-year transition period, as he had mentioned in a July 23, 1981, memo to Rubin and Glucksman, which they signed: “I of course have every intention of making LBKL my principal base for at least [his italics] five years.” Peterson was careful in their conversation in Glucksman’s office not to mention any possible transition dates to his co-CEO.

“Obviously, Lew, you and I have to have many more discussions on this. I want to be sure I understand your problem.”

The meeting dragged on for five hours, ending just after three o’clock. At one point, fruit salads arrived from the Lehman kitchen, delivered by tuxedoed waiters who had no idea of the momentous colloquy they were interrupting. Nor did partners who wanted to see Glucksman or Peterson; they paced back and forth in the corridor, wondering what was going on in there. Jim Boshart remembers needing to see Glucksman, and loping down the corridor every half hour or so. Always the door was closed. “What the hell are they talking about for five hours?” he remembers thinking.

The meeting ended inconclusively. The two men agreed to confer again. Peterson wasn’t alarmed. He thought of Glucksman as an electric personality, one capable of irrational behavior. He looked on the session, he recalls, as “a first discussion.” The firm was then earning pre-tax and pre-bonus profits of $15 million a month; Glucksman might cool off and retreat. Peterson had been in therapy since his second marriage dissolved in 1978; now happily married to Joan Ganz Cooney, he thought he was in touch with his own feelings while he believed Glucksman was “a stranger to his inner feelings,” his unconscious. He hoped that once Glucksman realized what a rash thing he had done, perhaps he would repent.

But Glucksman did not repent. He was a gambler used to quick, firm decisions. Make a market (set a price on a stock or bond). Buy. Sell. Hedge. Don’t hesitate. “What makes a good trader more than anything,” says Glucksman, “is the willingness to take losses.” To take risks. After the meeting, Glucksman hurried to Bob Rubin’s office down the hall and told him and Boshart what had happened. Glucksman said he had been explicit with Peterson and wanted him out now. But he told his two colleagues he was concerned that Peterson would hear what he wanted to hear. “So he suggested I talk to Pete,” recalls Boshart. Although Glucksman says the confrontation in his office with Peterson was unplanned, based on impulse, now his determination hardened. Like Machiavelli’s Prince, Glucksman knew he had to move fast, had to kill, not merely wound Peterson.

He was surprisingly confident that Peterson would leave. He realized that Peterson had not said no, had not threatened a donnybrook. He sensed that Peterson did not have the stomach for a fight. Peterson had been through his share of soul-wrenching experiences in recent years—the 1973–1974 struggle to save Lehman Brothers from collapse, surgery in 1977 for a brain tumor that turned out to be benign, a painful and much-discussed divorce, a happy remarriage that was clouded by several cancer scares his wife had had. Glucksman calculated that Peterson would not want to get into a messy public brawl that might leave nothing but carnage at Lehman and tarnish Peterson’s public image. Even if Peterson prevailed, he would have to assume that Glucksman and at least part of his trading team would move to another firm, as he came close to doing in the mid-seventies. If this happened, it would leave Peterson once again to manage Lehman on a day-to-day basis, something Glucksman knew Peterson dreaded.

Glucksman smelled weakness. He had quickly sized up the transaction and told Rubin and Boshart he believed that with a generous golden handshake, Peterson would leave. When he did, Lew Glucksman would be at the helm of his own ship.

*Both men agree on the exchange that followed.

*Glucksman does not deny the toast.